With economic uncertainty growing worldwide, Texas is making a move to secure its own finances. The state owns some 5,600 gold bars currently held at an HSBC bank facility in New York City. In June, the Texas legislator passed and governor Greg Abbot signed a bill that mandates the construction of a secure facility in-state to house the bullion, and bring it all back.
When former governor Rick Perry started pushing for the move publicly, speculation started up about the motivation behind it. The Washington Post was among the first out of the gates to speculate that Texas is contemplating secession, and compared the initiative to Germany’s recent request for removal of their state-owned gold from New York.
Other outlets speculated that the move is simply a hedge against coming inflation, designed to keep the state solvent even if other states and businesses collapse under the weight of a sinking dollar.
In truth, the state’s goal may be even more ambitious than that – Texas may be angling to create a currency that competes directly with the dollar.
The author of the bill, state Representative Giovanni Capriglione, spoke frankly about part of his plan. “I would like to see this all come together so we become a commodities hub for the continent,” he said. “I think we’re just perfectly situated.”
Governor Abbot pointed out the unique position Texas was placing itself in when he signed the bill. “With the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayers funds from leaving Texas to pay for fees to store gold in facilities outside our state,” said Abbot.
The other part of the plan is to allow depositors of precious metals and other commodities write checks against the value of their deposits. Texas has always been uncomfortable with Fiat money, as the state’s repeated election of End The Fed author Ron Paul to congress demonstrate. In that light, the creation of a hard, commoditized currency in Texas makes perfect sense.
In a strong signal that the state does in fact intend to compete with the Federal Reserve’s currency, the bill included strong language to protect the depositors’ interests. It states that no “governmental or quasi-governmental authority other than an authority of [Texas]” can take, regulate, move, or confiscate the commodities.
There are still logistical hurdles to overcome. The state has to determine a spot for the depository, and find a company to run it. In order to boost investor confidence, Texas also intends to have its facility certified by the Chicago Mercantile Exchange, COMEX. State officials also expressed hope that one of the larger existing banks will sign on to help facilitate the system.
If everything goes as planned, Texas will offer greatly expanded liquidity to people with large amounts of precious metals, and the state’s “don’t mess with Texas” image will attract investors away from other options for their commodity storage.
That should be good news for the state’s economy.